Petrobras raises $70bn in largest share offering

Sao Paulo, September 24, 2010

Brazilian state oil company Petrobras has raised $70 billion in the world's biggest share offering, giving the company the financial muscle it needs to tap vast offshore oil reserves.

The cash will help fund the world's largest oil exploration plan, which at $224 billion for the 2010-2014 period aims to turn Brazil into a major energy exporter.

The Rio de Janeiro-based company sold 1.87 billion new preferred shares at 26.30 reais each, the company said in a regulatory filing. It sold 2.4 billion new common - or voting - shares at 29.65 reais each.

Uncertainty that the offering might not come off had brought a prolonged sell-off of Petrobras shares that shaved more than $70 billion off its market value. But the optimism displayed by investors seeking exposure to one of the world's largest oil finds in recent decades outweighed worries about growing state involvement in the company's affairs.

'The deal priced at a very tight discount, which is comforting to know because the market expected it to price lower,' said Marcio Macedo, who manages about $40 million of stocks for Sao Paulo-based Humaita Investimentos. 'After this very successful deal, markets will be in a good tone tomorrow.'

The deal's 2 per cent discount to Thursday's closing price was much smaller than what investors expected, Macedo said.

This year, the preferred shares - the company's most widely traded class of stock - slumped 27 per cent partly because of worries of mounting state interference as well as uncertainty over the fate of the offering.

The record-setting stock sale, which was larger than what the company originally planned but fell short of the maximum it had filed to sell, had total demand of $87 billion, a source with knowledge of the deal told Reuters.

The bids included 98 billion reais ($57 billion) from existing shareholders and $30 billion from institutional investors, a source with knowledge of the transaction said.

Sovereign wealth funds from the Middle East and Asia were among the investors buying into the offering, the source said on condition of anonymity.

The offering had 'tremendous demand' from U.S. mutual funds, the source added.

Petrobras said in the filing that it may sell another 188 million new shares to meet demand in the next 30 days.-Reuters